At year-end, rent of Rs. 24,000 has been earned by a landlord but is not yet received or recorded. What adjusting entry is required by the tenant's landlord business?
Correct answer: D. Debit accrued rent and credit rent income
- A. Debit rent expense and credit accrued rent
- B. Debit rent income and credit accrued rent
- C. Debit cash and credit rent income
- D. Debit accrued rent and credit rent income
Explanation
The landlord has earned income and has a right to receive the amount, so accrued rent is debited as a receivable and rent income is credited. Cash is not debited because the amount has not yet been received.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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